I was talking to a young man starting a business the other day. He was very excited to be in business and ready to charge forward and make his mark. He has a service, a plan and is clearly willing to work hard to achieve his goals.
That conversation got me thinking about what would be the bullet points for running a successful business. That is, what ten things if mastered, would give a business the best chances for success? I know there are hundreds, but here would be my top ten:
- Everything has a cost.
- Figuring out the true costs of your goods and services should be the #1 goal of your business.
- Figuring out what you will charge people for your goods or services is the #2 goal of your business. Get #1 or #2 wrong for a long period of time, and you’ll be out of business quickly.
- Cost + percentage pricing for most businesses is inevitably less profitable than pricing based on the value to your customers.
- Make sure your business has some moats around key products. These might be exclusive distribution contracts, high-specialized skills (heart surgeon, artist, BMW-trained mechanic, ect.), extremely high barriers to entry for the competition, customization, etc.
- A one-person business is seldom going to provide exceptional earnings.
- Finding, training and motivating employees are the keys to growing a business. Money alone is seldom the top way to attract and retain excellent employees.
- You will be much more successful if you focus on bringing people up than putting them down.
- No business is an island, so treat your customers, suppliers, competitors, and community with respect and dignity. You’re all connected and need each other.
- When you own a business, you are responsible for everything. If you don’t want the responsibility for an amazing amount of issues-big and small-you’ll be happier working for someone instead of running your own business.
We don’t always get it right at Kona Impact. Occasionally we don’t treat our customers the way we like to be treated. Sometimes we lose an email in our inboxes, misplace a phone message or fail to provide the communication we should. No excuses. Not “buts”.
Most of the time we’re able to provide the level of service that makes our customers feel appreciated, valued and welcomed. This is not always easy when we work on up to 100 projects (many of them small) a month.
I don’t think we deserve an award for doing what we should. I always tell my daughter that she doesn’t deserve a cookie for doing what she should. Special rewards are for doing the extraordinary. (That said, a smile and a please will usually overcome my principles.)
Here are a few things we do that go beyond the ordinary:
Help Find the Best Fit – We send a good number of jobs to other companies these days. We used to take all jobs that we could do, but we were, perhaps, not the best provider in town. We now try to steer potential clients to the best provider of what they need, even if it isn’t us. Many callers are surprised when we tell them our competitor could do the job better, faster and less expensive than us.
Absolute Honesty – I was watching a show on travel scams the other day when they were doing a segment on ticket touts outside of the Vatican. They asked several of these touts if they would get a chance to meet the Pope. All answered, “yes.” Those, of course, are big lies. At Kona Impact we don’t tell clients that an exterior banner will last for years. It won’t. We don’t give teaser price quotes and then ask for more money later. If a client has information we know to be incorrect, we give them the truth. I wouldn’t want a supplier lying to me, so we don’t do it to our clients.
Quick Turnaround—We more than doubled our work space a few years ago. The biggest benefit of the large space is that we can have ample inventory and we can work on many projects at once. I love answering the question, “How long will it take?” with “One or two days.” For those accustomed to long wait times, it is certainly unexpected. It’s even more satisfying to be able to turn some projects on the same day. One of our clients, a well-known TV show, would send us projects at 5 am from LA, and want to pick them up at 8 am. While it made for extremely challenging days, we never missed a deadline.
Delivery-Many of our clients are stuck in their office, restaurant or work bay all day. For these customers, we do our best to offer complimentary delivery for their orders. With a bit of planning, we can combine deliveries, customer visits, and, oftentimes, lunch.
Site Visits—I know of one sign shop in Kona and one in the Kohala area that charge $100+ to go look at a premises for a sign, even if they don’t get the job. Even then, it’s hard to get them out of their shops for anything but the biggest projects. Perhaps they are understaffed or working alone, but it seems to be predatory to ask to be paid just to make an estimate. I can understand why they do this, but I don’t agree with their reasoning. I know from years of doing this, that site visits are essential to getting the customer the correct product, with the right materials and the right size.
The things that we should always be doing—good communication with clients, quality work, fair prices—do not make us exceptional. Doing these well are the base of any business, and if you don’t have them figured out, you won’t be in business very long. The unexpected—helping clients, even if it means losing a job, absolute honesty, quick turnaround, delivery and site visits-are part of what I believe sets us apart.
I once had a restaurateur, owner of one of most successful restaurants in town, tell me that one of the best things he did was to ask some customers not to come back. These customers would frequent his restaurant, but all they did was to bring grief to the waiters, the cooks and the management. Nothing was every right for them, and they would have at least a few complaints every time they came. Finally, the owner decided that these customers were not a good fit for the restaurant, and he strongly suggested to them that they should find a new place to eat and drink. The wait staff was happy; the cooks were happy and his management team was also happy.
The traditional customer service view is to do anything reasonable to make customers happy. This makes sense, and in our experience 80% of complaints, if handled appropriately, lead to future orders and retained customers.
But, what about the customers best described as malcontents or agitators? These are not your run-of-the-mill customers with legitimate concerns. Provide a reasonable solution for most customers, and they will accept it and move on.
Agitators and malcontents, however, have the following characteristics:
- Repeated complaints about relatively minor issues
- An unwillingness to accept reasonable solutions to their issue
- Using language and body language that is confrontational
- Framing their complaint as an us-versus-them battle
- Disrespecting low-level staff
- Trying to convince others to join “their side”
- Bullying behavior
After years of dealing with thousands of customers at Kona Impact, I’ve learned to differentiate between legitimate, solution-oriented complaints and malcontents who are just trying to create confrontation. We encounter maybe two or three malcontents a year. I strongly suspect that the malcontents have fairly persistent and deep-rooted personality issues, and I am fairly certain they are that way with many businesses, colleagues and friends. My job is not to try and fix their problems.
So, what can you do when you encounter the agitators and malcontents in business? The first thing is to do all you can to provide top-notch customer service: 1) listen to the customer, 2) empathize, 3) offer reasonable solutions, 4) keep calm and use non-aggressive language, spoken in a calm, measured way, and 5) make sure you follow through if do come to a consensus about how to solve the problem This should solve 95%+ of your customer service issues.
If you have come across a true malcontent and agitator and have done all you can, here’s what you can do:
- Agree to disagree and leave it at that. Accept that you will never get a win-win solution.
- Be mindful of any need you have to “win” or “have the last word”. That is the strategy of a malcontent, so let them “win” and “have the last word”.
- If you determine the situation is intractable and the person is causing undue stress for you or your business, tell he customer he or she will need to find a new provider.
- Tell the customer that his or her behavior is not acceptable at your establishment if he or she is disrespectful or disruptive.
- Do all you can to remain calm, resolute and polite. Agitators will feed off your reactions.
- If you believe the situation has become unsafe, it’s time to issue a no trespass order or call the police. Another option is a restraining order.
It’s never enjoyable to deal with someone who you cannot make happy no matter what you do. Fortunately, this is a very small number of people.
A few things in today’s newspaper caught my attention: 1) Governor Ige is likely to veto a bill that would have prohibited new fish collecting licenses, and 2) a story about how the recent publicity about rat lungworm disease might be affecting locally-grown produce. Both of these stories highlight what I call “existential threats to business”; things that, in a very short time, could completely destroy a business.
We often here the phrase “existential threats” in reference to things that could wipe out humankind on earth. These include asteroid impacts, extreme climate change and on local levels, earthquakes, tsunami and volcanoes. I think the term also works well for business.
Here are five existential threats to businesses in Kona, Hawaii.
- Earthquakes, tsunamis and volcanoes. Yes, all three occur in Kona and all three are expected to happen again, sooner or later.
- Government regulations. Governor Ige, if he did sign the fish collecting license law, would make it a dying industry. Likewise, our DLNR or federal authorities could shut down parts of our lucrative ocean recreation industry: banning or highly-regulating out “dolphin tours” or our manta night snorkeling/diving. The Public Utilities Commission basically killed the rooftop solar business when it took away net metering. We now see very few solar company vans or installation in Kona: regulation killed the business. One of the big fears in our agriculture industry is the possibility of a widespread immigration crackdown: many farms will be forced to shut down.
- Environmental changes. Many bee farmers stopped their businesses when the Varroa mite became widespread on the island. Many farmers have basically given up on using their land because of little fire ant infestations, which makes it very hard to get pickers on the land. The outbreak of rat lungworm cases this year could result in lettuce and raw produce farms to lose their markets. Rapid Ohia death has wiped out thousands of acres or tree-covered forests in a matter of months.
- A 300 pound gorilla enters the market. Many small retails and service business would be at great peril if a Mainland chain or well-founded locally-based competitor entered the market. When Sports Authority came to Kona, several small sporting goods companies were forced out of business. I know of a few businesses that are barely keeping on because of franchise chains with their purchasing power, superior supply chain management, high ad budgets and fancy stores, coming to town.
- Death of principal. Many family-owned businesses face existential crises when the patriarch or matriarch of the business dies. The family, which is often less committed to the business , has to decide to continue running the business, sell it or shut it down.
All of these existential threats are very real possibilities for the majority of small and medium-sized businesses in Kona. There are, of course, many more, but these are some of the ones that should keep business owners awake at night
A few weeks ago, I was in Los Angeles airport getting ready to board a flight back to Kona. The person next to me (clearly a tourist) sensed that I lived in Hawaii, so he struck up a conversation about things to do and see in Kona. His family had six nights and we going to stay at the Marriott Courtyard King Kamehameha Kona Beach Hotel. He couldn’t say all this and manage to get out “the Marriott King hotel in Kona.” I knew what he meant. His kids are teenagers.
So, what’s there to see and do in Kona for a family?
For the kids, I’d highly recommend going scuba diving. All the dive shops have what are called “introductory dives”, which is basically scuba diving with a dive master by your side. You don’t need a license and it will open your eyes to a whole new world.
For the family, the manta night snorkel is one of the highest rated activities in Kona. The manta rays to come near shore areas at night to feed on the plankton, which is attracted to the dive lights. It’s best described as manta ballet. All the dive boats do a good job of providing for a safe and enjoyable experience.
Snorkeling at Kahaluu Beach is another fun and enjoyable activity. It’s also free is you have snorkel gear. The beach area is protected so the waves are very calm. This are also lifeguards, so it’s a great place to go if you’re not accustomed to ocean snorkeling. Waning: don’t touch or harass the turtles! There are also surf lessons available (fee based) at the north end of the beach.
Deep sea fishing will set you back a big hunk of change, but imagine the fun of reeling in a few hundred pound tuna or a possibly a thousand pound marlin. There are few places in the world with a better chance of catching a big one than Kona, Hawaii. We recommend TOPSHAPE Kona Fishing for a deluxe boat and experience and High Noon for those on more of budget.
For a great morning trip or afternoon trip, visiting one of the Kona coffee plantations can’t be beat. Our favorite is Mountain Thunder Coffee Plantation, which is just above Kailua-Kona and is home to some of the best organic Kona coffee you’ll ever taste.
It’s a bit of drive, but visiting Mauna Kea will take you to a new world. The visitors center is as high as you can go is you don’t have a 4 wheel drive car, but it’s still a great place for star gazing and learning about the solar system. There are tours to the top, but they can be very expensive.
“The volcano” (actually there are five, but this refers to the active one) is on the other side of the island and will take at least two hours to reach. If you can see the lava flowing at night, as it often is in the crater, it’s a spectacular experience. Check the park website for lava flow information.
Kona, Hawaii is also home to hotel luaus, parasailing, dinner cruises and all the other expected activities in a tourist area.
One thing I recommend to tourists is to commit to eating all their meals and doing all their shopping at places they have never been to before. So, avoid the big box stores and chain restaurants and seek out places with local flavor and goods..
Kona Impact has worked with probably more than 1,000 businesses in the past ten years. Most are small and medium-sized businesses, and large amount are startups, new businesses that in the very early stages.
There are, of course, many things that need to go right for a business to grow and become sustainable. The products or services need to be right for the market. The pricing needs to be right. These are all givens, and most entrepreneurs figure these out fairly quickly.
The one thing that seems to be a make or break them is the ability to go beyond the “I’ll-do-it-all-myself” mindset and to seek out experts in areas in which they lack skills. That is, being an extreme do-it-yourselfer makes it almost impossible to grow a sustainable business. Even most successful artists have managers. At some point you need others, and the sooner you realize that, the better chance you will have to grow your business to a profitable (and worthwhile level).
Here, at a minimum, are the elements you need to master to start and grow a business:
- Business Logo and Collateral Design
- Product Design or Purchasing
- Service Offering Specification
- Information Technology Management
- Supply Chain Management
- Customer Service
- Equipment/Vehicle Repair and Maintenance
- Human Resources
I encourage business owners to look at this list and assign a letter grade to their skill level. For example, if you are awesome at sales–“A” level–but you have no bookkeeping, legal and branding experience, these are the jobs on which you want to work with a local supplier.
Here are four things to consider:
- In the global, connected and hyper-competitive business world in which we live, most businesses require “A” or “A-“ know-how and execution in nearly all the elements needed for a successful business.
- I have yet to meet the person who is at an “A” level in more than a few of the items above. This should be expected.
- Those who micromanage and try to do everything themselves are likely to be wasting a huge amount of time, money and opportunity costs, when they try to do everything themselves. They will also accomplish these tasks poorly and to a low degree of professionalism.
- The strategy of not doing what you’re not good at, and not hiring someone to do those things, is a recipe for disaster. Avoidance of crucial elements of a business is never a good strategy.
I like to call this the “entrepreneur’s curse”: we know enough to feel confident in many areas and we are too confident to know that we don’t know enough.
One strategy we took at Kona Impact was to assign employees to become experts in areas in which they have an interest and pre-existing skills. Others, like legal, bookkeeping, equipment maintenance and some product design tasks were outsourced immediately. I didn’t want to learn how to fix my office air conditioner, clean my carpets and write basic contracts. I knew I needed them, but I also knew that my time would be much better spend on things at which I was good.
Deep work is a concept that has existed since humankind has organized into societal units, if not before then. The idea is simple: the human mind is most productive when it can have long stretches of time to work on “big picture” problems without interruption. That is, the time that we can focus on the big issues and tasks that require sustained concentration. Some like to think of deep thinking of “being in the zone”–a highly productive time when you are oblivious to distractions.
For a small business owner, this might include time to work on business strategy or planning; doing accounting or taxes, writing a proposal or employee manual; reading about innovations or new business opportunities or just working out troublesome areas of the business without distractions.
Deep thinking is not: making Facebook posts, cleaning the office, sitting in meetings, multi-tasking (read a magazine while watching TV while eating dinner and talking to ones partner). It’s not texting while on the treadmill.
There are three keys to deep work: 1) mental isolation from distractions, 2) physical isolation from distractions, 3) a dedicated time to focus.
Mental Isolation from Distractions
We can only best focus our attention when we have a singular item on which to concentrate. I find I am least able to do deep work when I am multi-tasking. The other day I was trying to read a book, run the robo vacuum, do laundry and bake some rolls. In that hour, I heard beeps, buzzes and whirls every few minutes. There was no chance to effectively read and consider what I had read.
Here are a few tips to get into the right mindset for deep work:
- Use the first hour or two of every day for deep work. I like to get to the office around 6-6:30 in the morning, and, without even turning on my computer or looking at the mail or phone messages, I try get an hour or two of business reading done.
- Deal with the “elephant in the room”, the big things that will prevent you from focusing. If I have an important client issue to deal with, one that keeps me awake at night, there is no way I can get into a deep thinking mode until I have dealt with that issue.
- Spend some time exercising before you begin your deep work. I love to spent an hour or two doing heavy yard work before my scheduled deep work. Walking the dog or going for a hike are also ways for me to clear my mind and tire my body a bit before my deep work time.
Physical Isolation from Distractions
Let’s face it, we live in a work where we are just a arm’s reach away from distraction: smart phone, tablets and remote controls. The phone rings and our cell phones give us a beep or buzz when there is a new post, text message or email. There is always something more immediately satisfying than doing what we should and need to be doing.
Here are a few ways I like to physically isolate myself from distractions:
- The easy one: separate yourself from you phone, tablet, computer or phone. I keep mine in another room or leave them in my backpack.
- Use a call blocker. We have installed a call blocker at Kona Impact, which if it works properly will allow us to block a lot of the robo calls and unsolicited sales calls.
- Noise canceling headphones. I bought a pair of high end wireless noise canceling headphones a few weeks ago. They are a great investment for getting focused and avoiding distractions. I can’t hear the phone ring, or any environmental noises with these headphones. With some light classical music and these headphones, I can get into the zone quickly and stay there for a long time.
Dedicated Time to Focus
I schedule a time every day—usually 5am-7am when my daughter is in school and 5:30am to 7:30am when she’s not to work on my important but not urgent issues. The important and urgent are things best done during business hours, as they often require colleagues and interaction with suppliers and clients. These two hours, when everyone is asleep and the phone does not right are my time for deep work. I try to not look at email or text messages before I begin my deep work, lest I become mentally unfocused on preoccupied.
Another time I love is weekend mornings This is a great time to go to the lanai and just read or focus on big issues. On most weekends I can finish at least one book and have a few hours planning and focusing on big issues. Again, the key is to become mentally and physically isolated, so no cell phones, tablets or multi-tasking.
As a small business owner, I spend much of my day talking with other business owners and managers of larger business. I have had this conversation hundreds of times:
Business Owner: “How’s business?”
Client: “Oh, we’re really busy. Putting in a lot of hours and everyone is working hard to get the orders out.”
We all know this is just a conversation starter, like, “How are you?” But, if it were a genuine conversation, which sometimes it is, the next question should be: “Are you making money?” In other words, are you busy and broke or busy and profitable?
Unfortunately, many small businesses end up in the “busy and broke” category. Activity and sales do not necessarily equate to profits.
How do businesses end up in this trap?
- Pricing products or services too low. At Kona Impact we work with hundreds of businesses a year and find that underpricing is far more prevalent than over-pricing. The business owner thinks –often mistakenly so—that his or her customers are extremely price-sensitive, so to keep customers and gain market share, prices are kept low. This is seldom the case. Customers are very service sensitive and great service will give you opportunities for better pricing.
- Wrong products. Kona Impact does make a lot of business cards a year—probably well over 150,000 cards a year—but we make almost no money off these. We do, however, hope that those who need business cards also need signs, websites and marketing help. These are the products that keep our lights on. Our product mix, overall, is profitable, but we do certainly have no or low margin products to introduce customers to us. If all we did was low-margin printing, we would certainly be busy and broke.
- Excessive costs. I see many entrepreneurs become intoxicated with the idea of being in business and as a consequence they spend, spend, spend on things that they do not need at that time. A fancy office is nice, but this means you start every month with a big expense. Maybe that old delivery truck can make it a few more years. Borrowing money creates a monthly obligation…..with interest. If you are not making money because of high expenses, think of reducing your overhead to put a little more in your pocket every month.
- “Friend and family discounts.” Sure, we all want to be known as nice people, especially in a small community like Kona, Hawaii. I like to say that I could give away over half of my time and materials if I said yes to every request I get from fundraisers, non-profits and people within my circle of friends and acquaintances. Long ago, we realized that saying yes to everything meant we would not be building a sustainable business. We do give away a lot, and we do offer discounted pricing to organizations we support, but we now do so much more selectively than in the past.
- Not working efficiently. This encompasses everything from equipment to work processes. If your machine is half as efficient as your competitor’s, you need to work it twice as hard to get the same output. If your employees are not well training and supported, you might be paying a lot for meager results. If an employee is not contributing meaningfully to the bottom line, put some effort into retraining, reassigning job duties, or if he or she is not a good fit, finding a replacement.
The solution to being busy and broke is to look at your products, pricing and processes to see where you can find greater efficiencies and opportunities.
We’ve most certainly entered into another boom time in Hawaii. Home prices are up 50% or more since the bottom; the stock market is booming; tourism will see 7% year-to-year growth and unemployment is less than 3%. One builder I know has a three-year backlog of projects.
This, of course, is good news for our economy and our locally-owned businesses. It does, however, present some challenges if you want a house built or remodeled: there are very few qualified and available providers. If you want to go to your favorite restaurant, the one you could always just show up and get a seat, you might now need a reservation. If you are looking for a new vehicle, you might not have much bargaining power as many popular models are sold as soon as they get off the delivery truck.
So, what are some strategies you should consider as a customer to help you get what you want in a timely manner?
1. Establish relationships. At Kona Impact, we try very hard to buy our supplies and procure our services locally. We want to be on a first name basis with our suppliers, as we know it gets us better service and access to preferential treatment if we have a special request.
2. Leave some meat on the bone. Every business has clients who are always trying to cut costs to the point of being a “no profit” or “minimal profit” client. If you don’t let your suppliers make a fair and reasonable profit, you should expect to always be at the back of the line for the best customer service and delivery of products or services. I know, this is not the way it should be. That said, it is!
3. Be loyal with small and big projects. At Kona Impact, we have some clients who always come to us with their $10-$75 projects and go elsewhere for all their bigger projects. The fact is that we make very little profit, if any, on these small projects, and it is the big projects that keep our doors open. At the end of the day, if you aren’t letting your supplier make any money off you, he or she has very little incentive to maintain you as a client.
4. Pay immediately. Never ask for a service or product for which you don’t have the money to pay. There is nothing more aggravating in business than customers who mistake a business for a bank or financing company. Here’s the simple questions every business owner asks himself or herself: Which is better, $300 now (when the job is done) or $300 thirty or sixty days from now? By paying on time, you are immediately put the front of the line for projects, as you are a guarantee of immediate, no risk, cash flow for the business.
5. Don’t waste your supplier’s resources, which for most companies is time. Assuming that your supplier can effectively fill all the time he or she has with profitable work, wasting the time of your supplier is wasting his or her money. Typical ways customers waste the time of a business include: 1) not spending the time to figure out what they want, 2) coming to a meeting or appointment unprepared, 3) excessive design or order changes (see #1), 4) not following through on a project once it has begun, 5) excessive calls or email, and 6) a lack of planning and consequently always putting the supplier in crisis mode.
We like to say the following, “Everything has a cost. It is who pays that makes the difference in the sustainability of a business.” Ideally the client assumes all costs and the business can make a reasonable profit. All the items above are ways for clients to reduce unnecessary costs and build relationships with business. There is, of course, no free lunch, especially in times of a boom economy, so whatever customers or clients can do to make it easier for businesses to help them, the better access they will have to timely products and services.